Making Tax Digital

Under its Making Tax Digital initiative, the Government will require taxpayers with a turnover exceeding £10,000 to maintain digital accounts.

The UK tax agency should adopt a light-touch approach to penalizing taxpayers who fail to meet the new digital reporting requirements that will be introduced from 2019, tax experts have said.

The Chartered Institute of Taxation has said that the UK tax agency, HM Revenue and Customs (HMRC), should allow taxpayers a considerable period of time to adapt to the new requirements. This includes lighter penalties and filing extensions for a limited number of initial defaults.

The Making Tax Digital (MTD) project will present significant technological challenges to many small businesses and landlords not currently maintaining digital records. It is important that the penalty sanctions for the new regime reflect this, particularly in the early years.

In its submission to HMRC, the CIOT recommends that penalties are visible to taxpayers and their agents. They must not accumulate without the taxpayer becoming aware of them. Penalties must be kept simple to be are easily understandable to the ordinary taxpayer. There must be a straightforward right of appeal against the imposition of a penalty.

Because of the significant increase in reporting obligations, the CIOT argues the penalty amnesty for MTD. This should be similar to the three-year penalty amnesty when Real Time Information (RTI) was introduced.

There is a risk people with several forms of income will regularly face fines for lateness. A taxpayer who is VAT registered, has a trade and has a buy-to-let property may have 15 MTD deadlines year!

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